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Profit slumps at Buffett-backed China carmaker

October 26, 2010

Chinese carmaker BYD, backed by US billionaire Warren Buffett, saw its profits plunge 99 percent year on year in the three months to September, a report said Tuesday.

The Shenzhen-based company earned 2.43 billion yuan (365 million dollars) in net profit in the first nine months of the year, up 4.02 percent on year, BYD said in a statement filed with the Hong Kong stock exchange Tuesday.

The company did not provide quarterly earnings details.

However, a Dow Jones Newswires calculation based on the difference between BYD's nine-month and first-half results showed the firm's third-quarter net profit plunged to 11.34 million yuan from 1.16 billion yuan a year earlier.

Buffett thrust BYD, which began as a manufacturer of rechargeable lithium-ion and nickel batteries, into the international spotlight when he bought a 9.89-percent stake in the company in 2008 for 230 million dollars.

The "Oracle of Omaha" also handed celebrity-level endorsement to BYD late last month by bringing US software magnet Bill Gates along with him to attend a number of media events the company organised in several Chinese cities.

At one of those events, Buffett described BYD as a "young and energetic" company, and said he believes it will play an important role in the future of new energy technology.

Analysts said BYD's disappointing third-quarter results were mainly due to its weakening auto business and squeezed margins amid intensifying competition for its battery division.

BYD's domestic car sales fell 19 percent in August and 25 percent last month as growth in the overall China market moderated due to a removal of government stimulus measures for car purchases.

The company has scaled back its 2010 auto sales target to 600,000 units from 800,000.

China overtook the United States in 2009 to become the world's largest auto market.

BYD shares ended down 10.28 percent at 51.05 Hong Kong dollars (6.58 US) on Tuesday.

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